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Finisar Buyout of JDSU’s CCOP Inevitable?

December, 2014

Simply by a process of elimination, it is difficult to foresee any other player besides Finisar being interested in purchasing JDSU’s planned spinoff of its optical components portfolio, Communications and Commercial Optical Products (CCOP). Such a deal would provide Finisar with further diversification in the telecommunications transport space as well as potentially in new business sectors. Also, to whatever extent they presently go head to head with each other, it would eliminate a competitor from engaging in the cutthroat pricing behavior that is so prevalent in the market today. With its heavy focus on data communications, some industry observers have mentioned Avago Technologies as a possible acquirer of those JDSU assets in order to broaden its product line. However, there is a high likelihood that Avago would have a hard time justifying such a takeover after its...

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Would Nokia Sell AlcaLu’s Optical Landline Business?

May, 2015

A few years ago, Nokia decided to unload NSN’s optical networks division to focus more on the wireless sector. Now, with the proposed acquisition of Alcatel-Lucent, it will be entering the fiber optic business once again, only this time taking on a comparatively gigantic piece of the pie. While there would be some potentially attractive aspects of the product line including for backhaul applications, it would not be completely surprising if Nokia were currently thinking about divesting the entire optical segment down the road because the market has only worsened since its sell-off to Marlin Equity Partners. The expected spinoff of the submarine optics portion of the business makes the remaining product line even less desirable because as a general rule, the margins tend to be much higher with subsea because in cases of new construction, customers require a full turnkey job...

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Avago’s Spinoff of Optics in Short Term?

August, 2015

While for now, Avago Technologies will be preoccupied with the immense and time-consuming effort of its integration process with Broadcom, not too long afterwards, it would not be surprising if there would be a spin-off that would include a large number of the combined company’s optical networking assets. The progressive shift from a technology-focused firm to one that is more business-oriented should inevitably go beyond just making further sizable acquisitions, but to improve the balance sheet through aggressive divestment. Although KKR does not hold a stake in Avago anymore, we believe the supplier has been heavily influenced by the private equity firm’s modus operandi – purchase assets, find value, package parts, and sell off. One may easily presume that calling the merger, “Broadcom” instead of “Avago” probably has significance for its future technology...

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Avago Optical Assets Sold, Pointed Out by FoxConn PR

September, 2015

A recent press release written in Chinese apparently demonstrates that Hon Hai Precision Industry’s Foxconn Interconnect Technology has purchased some of Avago Technologies’ optical product lines. Our current understanding is that Foxconn will take over Avago’s module business fully, such as for QSFP transceivers, which has lower margins because of a high level of market competition, with the latter still providing the former with higher margin components, including lasers, TOSA/ROSAs, etc. FoxConn excels in the low-cost assembly process of incorporating such components. In fact, in what has been described by an executive at another optical company as a fantastically brilliant strategy of giving the assets away, including the Singapore operation, development people in the US, sales and marketing, etc., while maximizing margins, it is our present belief that Foxconn did...

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Finisar Should Play Hardball, Then Exit

October, 2015

Finisar’s current business model based on the all-encompassing optical components approach in the datacom/telecom market with a large amount of vertical integration from chips to subsystems, along with designing every conceivable flavor demanded by the space of a particular data rate, has become unsustainable. It is bad enough in a relatively slow growing business, particularly with 100G, to need to start developing the next form factor, so quickly after the supplier releases the last one, but also there is competing in a highly fragmented arena, especially against a lot of Asian manufacturers, which tend to put low prices way ahead of profits. Then to also have some of the major customers in recent years become competitors (either directly or indirectly) – probably makes it sheer insanity to continue such an operation. With Jerry Rawls taking over the reigns again at...

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